United States

Wall Street has handed local investors a constructive lead, with the S&P 500 posting its best session in a month after Federal Reserve governor Christopher Waller signalled he would be comfortable leaving the policy rate where it is provided inflation keeps trending toward the central bank’s 2% objective, while adding that a hotter reading would put a hike back on the table. The benchmark advanced 1.1% to 7,747.71, the Nasdaq 100 gained 1.2%, and the Dow Jones Industrial Average climbed 1.2% to 53,686.11, with megacaps doing most of the heavy lifting and consumer discretionary names pacing gains across eight of the eleven sectors.

The repricing in rates markets was the real story. Swaps now imply roughly even odds of a quarter of a percentage point increase at the 15 to 16 September meeting, down from about 70% earlier in the week, with the AFR putting the probability at 50.4% against 63.2% the previous day. Short-dated Treasuries outperformed, the two-year yield easing three basis points to 4.34% while the 10-year sat little changed at 4.77%. Waller was explicit that August inflation data due next week will heavily influence his thinking, which leaves that release as the swing factor for September.

Thursday’s economic data offered something for everyone, with initial jobless claims for the week to 29 August broadly in line and the services sector expanding at its fastest pace in six months on stronger demand and improving business activity. Attention now turns to tonight’s payrolls report, where economists are looking for a 55,000 rise and an unemployment rate holding at 4.1%.

Corporate news was heavy. Lululemon Athletica cut its full-year outlook for a second consecutive quarter and shares tumbled 17.7% in extended trade, with comparable sales down 9% in the second quarter, the first decline outside the pandemic period. Nvidia agreed to acquire Hugging Face in a deal valued at roughly $US13 billion, Snowflake soared after lifting annual sales guidance on the back of its AI-assisted coding tool, and Broadcom’s AI chip forecast underwhelmed. Adobe named Anil Chakravarthy as its next chief executive, OpenAI began rolling out its GPT-6 Astra model to business testers, and data centre operator Crusoe signed a five-year cloud contract with Jane Street worth about $US13 billion.

Europe

European equities finished modestly firmer, the Stoxx 600 adding 0.5% and the FTSE 100 rising 0.7% to 10,831.52 as the softer Fed pricing filtered through. Media was the standout sector with a 2.5% gain, driven by advertising agencies after Publicis won a $US1.7 billion global media account from PepsiCo, lifting Publicis 4.4% and dragging WPP along as a perceived collateral beneficiary. Banks added 1.4% and financials 1.5%, with Deutsche Bank, SocGen and Barclays all firmer.

Construction stocks outperformed with a 1.2% gain after Russian President Vladimir Putin suggested there was scope for constructive talks with Ukraine, though the same remarks knocked defence names lower, with Rheinmetall off 1.9% and Saab down 2.0%. The laggard was consumer products and services, sliding 1.4% as luxury was hit by the yen rally and its implications for tourist spending in Japan, sending Hermes down 3.3%, Richemont 3.1% lower and Kering off 2.0%. Elsewhere Soitec jumped 10.3% on upgraded revenue guidance tied to Photonics-SOI demand, and Deutsche Telekom firmed after activist Elliott built a stake. Bond markets rallied, the UK 10-year yield falling 10 basis points to 5.13% and the German equivalent easing three to 3.34%.

*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.

Commodities and currencies

The Australian dollar reached a four-month high of US72.08¢, its strongest since 15 May and up 7.8% for the year, easing back to just under US72¢ by early Sydney trade as the greenback slid 0.5%. The yen was the standout, surging around 2% to near 155.8 per dollar on Bank of Japan tightening bets and intervention watch. Oil firmed as Iran claimed fresh strikes on US bases, with WTI around $US91.70 and Brent up 0.3% to $US95.91, while Saudi Arabia’s smaller-than-expected price increase tempered supply concerns. Gold sat near $US4,473 an ounce, iron ore futures slipped 0.5% to $US98.85, and bitcoin jumped 5.4% to $US81,578.

Economic Calendar

US:

• Change in Non Farm Payrolls 22:30
• Unemployment Rate 22:30